Mr. Jamie Levy reports
GENERATION MINING DELIVERS ROBUST INDEPENDENT PEA FOR MARATHON PALLADIUM PROJECT
Generation Mining Ltd. has released results of a positive independent preliminary economic assessment study (PEA) prepared in accordance with National Instrument 43-101 on the Marathon palladium and copper project located in Northern Ontario. Generation acquired a 51-per-cent interest in the project from Sibanye Stillwater in July, 2019, and has an option to earn up to an 80-per-cent interest by spending $10-million within four years (see Generation Mining's news release dated July 11, 2019). The PEA provides a compelling base case assessment for the development of the Marathon palladium mineral resource by open-pit mining.
Highlights (all dollar amounts on a 100-per-cent project ownership basis unless otherwise indicated):
-
The project would produce an average of 194,000 palladium equivalent ounces per year over a 14-year mine life (including credits for copper, platinum, gold and silver).
- The project generates an after-tax internal rate or return (IRR) of 30.0 per cent and an after-tax net present value (NPV) of $871-million at a 5-per-cent discount rate at Nov. 30, 2019, two-year trailing average metal prices (base case).
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The project generates an after-tax net present value of $1,541-million and an internal rate of return of 45.8 per cent at a 5-per-cent discount rate at recent spot metal prices (final LBMA (London Bullion Market Association) price fix for precious metals; final LME (London Metal Exchange) bid price for copper, Dec. 31, 2019).
- The project would generate base case after-tax cash flows of $520-million in years 1 to 3, resulting in a 2.5-year payback period.
-
Actual palladium production will average 107,000 ounces annually over the mine life, at a cash cost per ounce of $504 (U.S.) and an all-in sustaining cost (AISC) of $586 (U.S.) per ounce, net of byproduct credits.
- The PEA used only measured and indicated mineral resources in the Marathon deposit in its calculations, and did not include the Geordie and Sally deposits, which are located on the same property (see news release dated Dec. 2, 2019). The Marathon deposit has no outstanding royalties or financing streams registered against it.
Generation Mining will host a conference call on Jan. 7, 2020, at 11 a.m. Eastern Standard Time to discuss these results. Call-in information is provided at the end of this news release and on the company's website.
PEA BASE CASE FINANCIAL SUMMARY
(all dollar amounts presented on a 100-per-cent ownership basis)
Pretax net present value (5% discount rate) $1,184-million
After-tax net present value (5%) $871-million
Pretax internal rate of return 35%
After-tax internal rate of return 30%
After-tax payback 2.5 years
Preproduction capital $431-million
Sustaining capital $277-million
Life-of-mine cash cost per oz PdEq* $504 (U.S.)
LOM all-in sustaining cost per oz PdEq* $586 (U.S.)
Mine life 14 years
years 1-5: 14,000 tpd,
Throughput year 6-14: 22,000 tpd
Metal prices
Palladium $1,275/oz USD
Copper $3/lb USD
Platinum $900/oz USD
Gold $1,300/oz USD
Silver $16/oz USD
Exchange rate $CAD:$USD $1.32
Avg. net smelter return per
Mineralized tonne processed (LOM) $48.39
* Net of byproduct credits.
Jamie Levy, president and chief executive officer of Generation, commented: "This study supports at a PEA level of confidence the company's opinion that a low-cost operation is possible at the Marathon deposit. The project has a very robust after-tax IRR of 30 per cent and after-tax net present value approaching $900-million, with a payback of 2.5 years in a mining-friendly jurisdiction. The PEA doesn't include potential feed from two additional deposits with NI 43-101 mineral resource estimates located on the property which will require additional study.
"With the consensus outlook for palladium and copper strong for the next several years," commented executive chairman Kerry Knoll. "This is a project whose time has come. As governments worldwide continue to mandate a higher palladium load for environmental reasons in most automobiles and little new mine capacity being scheduled to come on stream, Generation Mining plans to fast-track a feasibility study and permitting, and expects 2020 to be a pivotal year in the company's growth."
The PEA examined several mining scenarios with varying rates of production and cut-off grades, and determined that a 14-year project life mining 89.4 million mineralized tonnes provided the best financial return at Nov. 30, 2019, two-year trailing average metal prices. The project is expected to employ an average of 312 local workers over the life of the mine.
To maintain preproduction capital costs to a minimum, the PEA recommends starting the project at 14,000 tonnes of process plant feed per day and increasing to 22,000 tonnes per day in the sixth year of operations. The operation is designed to produce a single copper concentrate containing palladium, platinum, gold and silver with minimal deleterious elements. One of the reasons for the relatively low capital costs is that the Marathon project is located near the established mining town of Marathon, Ont., as well as an airport and the CPR main rail line. Both the Trans-Canada Highway No. 17 and the new 230-kilovolt east-west tie power line cross the property.
The PEA was prepared by P&E Mining Consultants Inc. of Brampton, Ont., which has been involved in the Marathon project for the past 13 years and previously prepared the mineral resource estimate for the Marathon deposit on behalf of Generation Mining.
PEA TECHNICAL SUMMARY
Mine life 14 years
Mine plan tonnage 89.4 million tonnes
Process plant feed grade
Pd 0.69 g/t
Pt 0.21 g/t
Au 0.07 g/t
Ag 1.5 g/t
Cu 0.22%
PdEq grade 1.26 g/t
Strip ratio (waste:process plant feed) 3.0:1
Operating cost (tonne) $19.12
PAYABLE METAL RECOVERIES
(presented on a 100-per-cent ownership basis)
Metal Process plant recovery On-site recovered metal to concentrate Payable metal
LOM palladium 82.90% 1.63 million oz 1.41 million oz
LOM copper 90.00% 401.3 million lb 340.3 million lb
LOM platinum 74.50% 0.45 million oz 0.32 million oz
LOM gold 73.20% 0.16 million oz 0.12 million oz
LOM silver 71.50% 3.12 million oz 2.01 million oz
PIT-CONSTRAINED MINERAL RESOURCE ESTIMATE AT $13/TONNE NSR CUT-OFF (1-7)
Classification Tonnes Pd Pt Cu Au Ag PdEq Pd Pt Cu Au Ag PdEq
(k) (g/t) (g/t) (%) (g/t) (g/t) (g/t) (koz) (koz) (Mlb) (koz) (koz) (koz)
Measured 103,337 0.64 0.21 0.20 0.07 1.5 1.34 2,123 688 463 239 4,964 4,445
Indicated 75,911 0.46 0.15 0.20 0.06 1.8 1.10 1,115 376 333 151 4,371 2,685
Measured and
indicated 179,248 0.56 0.18 0.20 0.07 1.6 1.24 3,238 1,064 796 390 9,335 7,130
Inferred 668 0.37 0.12 0.19 0.05 1.4 0.95 8 3 3 1 31 21
(1) Mineral resources which are not mineral reserves do not have demonstrated economic viability.
(2) The estimate of mineral resources may be materially affected by environmental, permitting, legal,
title, taxation, socio-political, marketing or other relevant issues.
(3) The inferred mineral resource in this estimate has a lower level of confidence than that applied to
an indicated mineral resource and must not be converted to a mineral reserve. It is reasonably expected
that the majority of the inferred mineral resource could be upgraded to an indicated mineral resource
with continued exploration.
(4) The mineral resources in this report were estimated using the Canadian Institute of Mining,
Metallurgy and Petroleum (CIM), CIM Standards on Mineral Resources and Reserves, Definitions and
Guidelines prepared by the CIM standing committee on reserve definitions and adopted by the CIM council.
(5) The mineral resource estimate was based on U.S.-dollar metal prices of $1,100/ounce Pd, $900/ounce
Pt, $3/pound Cu, $1,300/ounce Au and $16/ounce Ag. The U.S. dollar:Canadian dollar exchange rate used
was 0.77.
(6) The NSR estimates use flotation recoveries of 93 per cent for Cu, 82 per cent for Pd, 80 per cent
for Pt, 80 per cent for Au, 75 per cent for Ag and smelter payables of 96 per cent for Cu, 93 per cent
for Pd, 88 per cent for Pt, 90 per cent for Au, 90 per cent for Ag.
(7) The pit optimization used a mining cost of $2 per tonne, combined processing, G&A and off-site
concentrate costs of $13/tonne and pit slopes of 50 degrees.
PIT-CONSTRAINED MINERAL RESOURCE ESTIMATE SENSITIVITY AT $25/TONNE NSR CUT-OFF
Classification Tonnes Pd Pt Cu Au Ag PdEq Pd Pt Cu Au Ag PdEq
(k) (g/t) (g/t) (%) (g/t) (g/t) (g/t) (koz) (koz) (Mlb) (koz) (koz) (koz)
Measured 70,792 0.82 0.25 0.25 0.09 1.5 1.67 1,864 578 387 194 3,510 3,794
Indicated 45,279 0.60 0.19 0.25 0.07 1.9 1.40 871 272 252 106 2,817 2,032
Measured and
indicated 116,071 0.73 0.23 0.25 0.08 1.7 1.56 2,735 850 639 300 6,326 5,826
Inferred 144 0.62 0.16 0.28 0.05 0.9 1.41 3 1 1 0 4 7
The mining plan uses conventional truck/shovel open-pit methods employing 221-tonne capacity haulage trucks and shovels equipped with 29-cubic-metre buckets. Three pit areas will be mined over a period of 14 production years and one year of prestripping. Mineralized material will be transported by haulage trucks to a nearby process plant, and waste rock will be stored at a facility located 100 metres east of the open pits. Mining will be conducted at an initial rate of 24 million total tonnes per annum (mtpa), and will reach a peak of 36 mtpa based on process plant feed and waste rock removal requirements.
The process plant feed is contained within an optimized subset of the mineral resource set out in the associated table. Collectively, the three pits contain 89.4 million tonnes of process plant feed (inclusive of mining dilution and loss factors) averaging 1.26 g/t PdEq (0.69 g/t Pd, 0.22 per cent Cu, 0.07 g/t Au, 0.21 g/t Pt and 1.52 g/t Ag). The process plant feed is associated with 270 million tonnes waste rock resulting in an overall life-of-mine strip ratio of 3:1. It is notable that all mineral resources considered for mining are only within the measured and indicated classifications.
Approximately 25 million tonnes of process plant feed will be stockpiled and reclaimed from stockpiles over the mine life. No backfilling of mined-out open pits with either waste rock or tailings is planned, which will allow potential open-pit wall pushbacks and future mining if economic conditions become favourable.
Extensive metallurgical testing was carried out at various reputable laboratories by several past owners including Stillwater Canada, a subsidiary of Sibanye Stillwater and Generation Mining's partner in the project. The testwork has indicated process recoveries of platinum group metals (PGM) and copper to be reasonably high and relatively consistent. The most recent tests focused on circuit stability and maximizing concentrate grade. For the first five years, the Marathon process plant will treat five mtpa of mineralized material by using the following major components and processes:
- Crushing and grinding to a moderate grain size;
- Froth flotation of a copper rougher concentrate, which is reground and refloated several times for copper grade improvement;
- Regrinding of the copper flotation tails and a PGM rougher flotation concentrate is recovered;
- The PGM concentrate is reground and refloated to improve PGM grade;
- The Cu and PGM concentrates are combined, thickened, filtered and prepared for shipment to a smelter.
From year 6 onward, the process plant will treat eight mtpa after incorporating the following components:
- Increased crushing and grinding capacity -- second-stage crushing and an additional ball mill;
- Additional flotation capacity.
The expansion of process plant capacity from five mtpa to eight mtpa at year 6 is expected to benefit from the first five-year operational experience, providing opportunities for process efficiencies.
Tailings and waste rock management is designed for closure and the elimination of concerns for acid drainage or metal leaching.
INITIAL CAPITAL COSTS
($ millions)
Prestripping $15.3
Mining 40.6
Processing plant 272.8
Tailings management facility 14.3
Site infrastructure 54.0
Contingency 34.1
Total initial capital 431.0
SUSTAINING CAPITAL
($ millions)
Mining $128.1
Processing plant 38.3
Tailings management facility 67.0
Closure 30.0
Contingency 13.5
Total sustaining capital 277.0
LOM OPERATING COSTS
($ per tonne)
Mining cost per tonne
mined material (waste and mineralized material) $2.34
Mining cost per tonne plant feed 9.23
Processing cost per tonne plant feed 8.92
G&A per tonne plant feed 0.97
Total cost per tonne plant feed 19.12
ECONOMIC SENSITIVITIES
(presented on a 100-per-cent ownership basis)
US$/oz Pd $700 $900 $1,100 $1,275 $1,500 $1,700 $1,900
NPV (5% discount after-tax $M) 255 469 684 871 1,112 1,326 1,540
IRR (%) 13.4 19.6 25.3 30.0 35.8 40.8 45.7
Payback (years) 6.4 4.0 2.9 2.5 2.1 1.8 1.6
NPV AT 5-PER-CENT DISCOUNT RATE SENSITIVITY AFTER TAX
($M)
% -20 -10 0 +10 +20
Opex 973 922 871 820 769
Capex 1,048 960 871 782 694
IRR SENSITIVITY AFTER TAX
(%)
% -20 -10 0 +10 +20
Opex 38.1 33.7 30.0 26.9 24.3
Capex 33.9 32.0 30.0 27.9 25.8
DISCOUNT RATE SENSITIVITY AFTER TAX
($M)
0% 1,427
5% 871
6% 790
8% 648
10% 531
The project site is within the Robinson-Superior Treaty, which confers certain rights to aboriginal peoples in the area. Generation recognizes the traditional rights of indigenous people and acknowledges the exercising of treaty rights to preserve their cultural identity and customs. As such, upon acquisition of the Marathon project, Generation has continued to regularly meet with communities to get feedback and incorporate the feedback into the company's decision-making process. Generation is striving to ensure these partnerships have mutually beneficial outcome and to maintain strong and long-lasting relationships. Generation and its predecessors have been engaged in consultation and negotiations with a number of aboriginal communities with respect to the project since 2004.
About the Marathon palladium project
The Marathon deposit is the largest undeveloped platinum group metal mineral resource in North America. The Marathon property covers a land package of approximately 22,000 hectares or 220 square kilometres. Generation Mining acquired a 51-per-cent interest in the Marathon property from Sibanye Stillwater on July 10, 2019, and can increase its interest to 80 per cent by spending $10-million over a period of four years. More than $3-million of this has already been spent. Sibanye Stillwater has certain back-in rights that can bring its interest in the property back to 51 per cent after such time as Generation Mining has earned its 80-per-cent interest (see the company's press release of July 11, 2019, for more details).
Qualified persons
Rod Thomas, PGeo, company vice-president, exploration, and a director, and Eugene Puritch, PEng, FEC, CET president of P&E Mining Consultants Inc., have reviewed and approved the scientific and technical information contained in this news release. Mr. Thomas and Mr. Puritch are qualified persons.
Technical report
An NI 43-101 technical report to support this PEA press release will be filed on SEDAR within 45 days.
Conference call
An audio conference call will be held with members of Generation Mining management and representatives from P&E on Tuesday, Jan. 7, at 11 a.m. Eastern Standard Time. Participants toll-free dial-in number (U.S. and Canada) is 1-833-753-7228. International callers can dial 769-208-9284. The conference ID number is 9977613. There will be a short presentation followed by a question period.
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